The stock markets are on a roll! From the troughs of April, the BSE sensex has gained a whopping 68 per cent. With Samvat 2060 set to unfold on October 25, the foreign institutional investors have shown remarkable confidence in Indian stock markets by shovelling hundreds of crores of rupees into the market every day.

The BSE sensex — the 30-scrip barometer of the stock market’s mood — is tantalisingly close to the 5000-mark and many small investors are probably wringing their hands in despair at the prospect of missing out on the bull run.

The big question on everyone’s mind: Is it too late to join the party'

We asked the experts and this is what they say.

Sanjay Sinha, fund manager at UTI Mutual Fund who manages the index funds and the popular Petro Fund:

Equities must form part of the investment portfolio of every investor. But this should be done in a systematic manner. The retail investor should first ascertain the risk appetite. The younger the investor, the higher the risk appetite, he says.

He also recommends that investing in equities have become too specialised and should be left to mutual funds or investment portfolio managers. The age group between 30-40 years can put 30 to 40 per cent of their investible funds in equities.

Sanjay, being very conservative, wants that 30-40 per cent in equities to be again put in different baskets. He would advise 10 per cent in an index fund, 10 per cent in diversified equity fund and the balance 10 per cent in one or two sector funds.

He also has a caveat: All investments should be made through the systematic plan that entails investments through periodic instalments as it will help average the costs.

Jamshed Desai, head of equity research in Taib Securities:

He is unequivocal about his views on small investors. These are dangerous times, he says. Small investors will again be trapped if they enter at this stage when many scrips are quoting at new highs. There could be a correction round the corner

Be conscious of your risks and don’t blame the markets if you lose. The risk-reward ratio is skewed against an entry at this stage. If the risk reward ratio was 35:65 in April, now it is almost 65:35, and “the returns are not commensurate with the risks”.

He expects the markets to correct 10 per cent or more. They could enter then, and even if they enter after the correction they should look at mutual funds to manage their funds in the equity markets.

His advice: Stay away from the markets if you have no one to hold your hands.

Arun Kejriwal of Kejriwal Research and Investment Services (KRIS):

Kejriwal has always had a contrarian view. He feels small investors can still buy stocks, provided they know the thumb rules for investing. He is sceptical of mutual funds. Most of the funds (except for a few sectoral funds) have under-performed the market, he reckons.

Kejriwal says when one invests in stocks, the investor should set a target. Once the target is met, he should exit the stock. The same way, he should set a target to stop loss. The moment the stock sheds say 20-to 25 per cent of the expected appreciation, one should trigger the stop loss and book losses. Secondly, you should invest only in the market leader in each sector. He cites the example of Tata Steel and Steel Authority of India Ltd (SAIL). SAIL after showing sharp upswings initially could not sustain, whereas Tata Steel went from strength to strength.

Kejriwal still feels there are quite a few stocks that give a good yield of 6-8 per cent. Investors could look at such companies with a proven dividend record which is safe and offers the scope for capital appreciation in addition to the tax free dividend.

He says that if these ground rules are followed, then the investor need not go through mutual funds to invest in shares. It is costly business too, as mutual funds have started charging entry loads and exit loads.